Question 28Q - Intermediate Accounting (Kieso)

Question

How are financial accountants challenged in their work to make ethical decisions? Is technical mastery of GAAP not sufficient to the practice of financial accounting?

Step-by-Step Solution

Answer

Accountants must consider the moral dimensions of certain circumstances as Generally Accepted Accounting Principles (GAAP) cover up all important characteristics to be reported in the financial statements. 

Yes, technical mastery of GAAP is insufficient for the practice of financial accounting.

Meaning of Ethical Behavior

Ethical behavior is defined as actions that are performed in accordance with laws and at the same time affirm human morals and values and are not impacted.

Challenges faced by financial accountants in their work to make ethical decisions

Companies that focus on “expansion of the bottom line,” “facing competition challenges,” as well as “stressing over short-term outcomes” put accountants in a situation of pressure and conflict. Since all the important features are not recorded in the financial statements under Generally Accepted Accounting Principles (GAAP), in this case, accountants must select among the alternatives. These accounting choices determine if specific stakeholders may be in loss or benefit. 

Competency of technical mastery of GAAP to the practice of financial accounting

Technical mastery is not enough when making ethical decisions because basic ethical questions are sometimes difficult to answer by only following Generally Accepted Accounting Principles (GAAP) or the rules of the profession.